U.S. Markets closed

SoftBank Eyes WeWork Rescue Valuation Below $8 Billion

Gillian Tan, Sonali Basak, Michelle F. Davis and Saritha Rai

(Bloomberg) -- SoftBank Group Corp. is assembling a rescue financing plan for WeWork that may value the office-sharing company below $8 billion, according to people familiar with the discussions.

The new figure is a fraction of the $47 billion valuation the startup commanded as recently as January. The talks are fluid and the terms could change, said the people, who requested anonymity because the discussions are private.

WeWork, reeling since it scrapped its initial public offering, has been considering dueling plans from SoftBank and JPMorgan Chase & Co. to shore up its finances before it runs out of cash as early as next month. The company’s board could make a decision as soon as this weekend, according to some of the people familiar with the situation.

Representatives for WeWork and SoftBank declined to comment.

JPMorgan has been pitching investors on a $5 billion junk-debt package for WeWork. The unsecured and secured notes portion of the bank’s plan are being offered on a “best-efforts” basis, according to people familiar with the matter, meaning banks haven’t committed to funding the deal irrespective of investor demand.

The bank has been sharing its proposal with about 100 investors as it tries to line up support for what would be one of the riskiest debt offerings in recent years, people with knowledge of the matter said earlier this week.

Uncertainty around WeWork’s future has whipsawed its bonds in recent weeks. The debt plunged to record lows on Tuesday as the company weighed a financing package that included debt that could yield 15%, only to erase those losses a day later amid reports that SoftBank was considering a new investment. The debt currently trades at around 85 cents on the dollar, and hasn’t been near par since before the company pulled its IPO last month.

SoftBank, which with its affiliates already owns a little under one-third of WeWork, has been in discussions to provide the company with $5 billion of funding in a mix of equity and debt. The financing would come directly from the Japanese firm, rather than its Vision Fund, a person said earlier this week. SoftBank would not amass a majority of voting rights, though its stake would increase, the person said. Part of the package may include non-voting preferred stock.

Part of the appeal of the SoftBank plan is the office-sharing company’s longstanding relationship with the investment behemoth, one of the people said. At the same time it would further dilute existing shareholders and employees -- a consideration in favor of the JPMorgan proposal.

(Updates with bond prices in seventh paragraph.)

--With assistance from Claire Boston.

To contact the reporters on this story: Gillian Tan in New York at gtan129@bloomberg.net;Sonali Basak in New York at sbasak7@bloomberg.net;Michelle F. Davis in New York at mdavis194@bloomberg.net;Saritha Rai in Bangalore at srai33@bloomberg.net

To contact the editors responsible for this story: Craig Giammona at cgiammona@bloomberg.net, Alan Goldstein

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.